The economic similarities between today and 1980 are plentiful. Whether it is gold prices, unemployment, energy volatility or general malaise, history seems to be repeating itself. Unlike thirty years ago, however, we are neither expecting or experiencing a recovery. This past Friday, Stephen Moore addressed the issue with a rousing salute to Ronald Reagan's economic program. Not shockingly, it was also a not too thinly slap in the face of Keynesianism under the guidance of President Obama. He also misspelled Obamanomics, if a not quite real word can actually be misspelled.
Though there are elements of huff and puff to the article, there is also a very salient message. One which is directly connected to many of the debates we have been having here on WSO as of late.
The two presidents have a lot in common. Both inherited an American economy in collapse. And both applied daring, expensive remedies. Mr. Reagan passed the biggest tax cut ever, combined with an agenda of deregulation, monetary restraint and spending controls. Mr. Obama, of course, has given us a $1 trillion spending stimulus.
By the end of the summer of Reagan's third year in office, the economy was soaring. The GDP growth rate was 5% and racing toward 7%, even 8% growth. In 1983 and '84 output was growing so fast the biggest worry was that the economy would "overheat." In the summer of 2011 we have an economy limping along at barely 1% growth and by some indications headed toward a "double-dip" recession. By the end of Reagan's first term, it was Morning in America. Today there is gloomy talk of America in its twilight.
In my opinion, the most interesting point in Moore's argument is one that cannot be disputed. America was in deep financial turmoil in the late 70's. The world was a lot crazier place than it is today. People were suffering and times were tight. Yet, the U.S. under Reagan rose up and enjoyed an unprecedented economic growth run which made many Americans millionaires merely via the old buy and hold.
Congruently, Wall Street boomed like never before. Bonuses were gargantuan, the hedge fund and private equity industries grew up, matured and became the masturbatory inspiration of many a monkey. Yet interestingly enough, very few people on this forum propagate the underlying ideals of Reaganomics. More and more industry professionals (from those I speak to) seem to be accepting Keynesianism vis-a-vis Obamanomics as the proper way to go.
Whether I have the right impression or not, I am still very curious what the poll numbers would be if I went up and down Wall Street asking monkeys to choose between the two dogmas. In either case, I suggest checking out the comments to the article...some good arguments on both sides of the equation.